Three policemen, each with his own motives and obsessions, tackle the corruption surrounding an unsolved murder at a downtown Los Angeles coffee shop in the early 1950s. Detective Lieutenant Exley (Guy Pearce), the son of a murdered detective, is out to avenge his father's killing. The ex-partner of Officer White (Russell Crowe), implicated in a scandal rooted out by Exley, was one of the victims. Sergeant Vincennes (Kevin Spacey) feeds classified information to a tabloid magnate (Danny DeVito).

Chili Palmer (John Travolta) is a Miami mobster who gets sent by his boss, the psychopathic "Bones" Barboni (Dennis Farina), to collect a bad debt from Harry Zimm (Gene Hackman), a Hollywood producer who specializes in cheesy horror films. When Chili meets Harry's leading lady (Rene Russo), the romantic sparks fly. After pitching his own life story as a movie idea, Chili learns that being a mobster and being a Hollywood producer really aren't all that different.

Larry (Billy Crystal), an author with a cruel ex-wife, Margaret (Kate Mulgrew), teaches a writing workshop where Owen (Danny DeVito), one of his students, is fed up with his domineering mother (Anne Ramsey). When Owen watches a Hitchcock classic that seems to mirror his own life, he decides to put the movie's plot into action and offers to kill Margaret, if Larry promises to murder his mom. Before Larry gets a chance to react to the plan, it seems that Owen has already sealed Margaret's fate.